And on the seventh
year the market rested.Just when
we got used to stocks going ever higher.

Someone recently
wrote that if you totaled up each day's move in the Dow Jones it would be
roughly 30,000 points.After all of
that noise and smoke, we finish the year almost unchanged.It is a bit comical.But,
you can't argue, the markets were due for a rest after their long run up.

During 2015, if it
was any currency other than the U. S. dollar, it was lower.If it came out of the ground it's price was lower; and if it was tied to
interest rates, it traded lower as well.Nor
did stocks provide much shelter.Cash
proved to be a pretty good bet on the year.

For the second
year running, the dollar was up against almost every other currency in the
world.We may not notice this in
our day-to-day lives.We are
perhaps much more attuned to the price of oil, and it's derivative, gasoline,
where lately we have been paying half the price of a year or so ago.But it isn't just oil; almost all metals and minerals and many
agricultural products saw dramatic price declines.Oversupply seems to be the culprit.

Over in the bond
market prices were lower across the board, as the Fed, in a widely anticipated
action, closed the year by finally moving to hike interest rates after six years
of bouncing along at near-zero.Also
in December a major high-yield bond fund ran into liquidity problems,
exacerbating declines in bond prices that had otherwise been gradual during the
year.

As for stocks,
they were lower as well, breaking a run of six consecutive up years.The decline was only marginal, especially in light of that run, which
carried us up more than 100%.

So what might we
look for in the new year?In 2004
the Fed began raising rates with a 25-basis-point move.They continued doing that each month for a total of 17 months, lifting
rates from 1% to 5.25%.By 2007 the
cracks were beginning to show in the nation's economy and the Fed began cutting.By 2009 we were at a level just above zero, where we have stayed until
this latest move.

I relate this to
show that it is not just the one move that might effect us, but rather the
possibility of multiple moves that would take rates substantially higher.During the financial crisis of last decade the Fed began pumping cash
into the banking system.Now they
will try to pull that cash back out.These
moves have implications across the spectrum of investment assets and the economy
as a whole.

I do have to note
that the Fed has said the push up will be gradual and I believe they will be
true to their word.What I expect
is perhaps four to six more boosts over the next 12-18 months.I also note that the Fed's action is a positive sign, indicative of the
general health of the economy.

For the year ahead
it would not surprise me to see lower stock prices.If you are a buyer, you should welcome the discount, as Warren Buffett
has said on more than one occasion. After
all, every market drop in our long history has proven to be a good opportunity.But, so far, outside of oil stocks, prices have not really come down
enough to tempt a conservative investor like me.Would you be tempted to go into a store that advertised "2%
Off!"You might think that
they had skipped a digit.

Stocks and bonds
are not garments, however, and when they get marked down by double-digit
percentages, most people do not look at it as a good thing.They get scared and think that something is seriously wrong.The thought process is something like this:if it is down 20%, maybe it will go down 40%.As always, fear versus greed.

But it is
difficult to imagine any meaningful decline in the overall stock market at this
point.So we must look for
attractive entry points in individual issues.I always look to be a buyer of quality equities.I am, after all, a long-term investor.In bonds, however, I believe that the thirty-five year bull market has
come to an end, and it will be much trickier to generate the returns we have
seen previously.We shall see what
the Fed has in store for us going forward, but I suspect that the best buys--and
the safest--may be in shorter-term paper.I
have been holding higher than normal levels of cash in my stock and bond
accounts and I am prepared to take advantage of opportunities when and if they
appear.